In this work, we have developed and tested in vivo a dry powder form of niclosamide made by thin-film freezing (TFF) and administered it by inhalation to rats and hamsters. The niclosamide dry powder, suitable for inhalation, is being developed as a therapeutic agent against COVID-19 infection. Niclosamide, a poorly water-soluble drug, is an interesting drug candidate because it was approved over 60 years ago for use as an anthelmintic medication, but recent studies demonstrated its potential as a broad-spectrum antiviral with a specific pharmacological effect against SARS-CoV-2 infection. In the past, clinical trials for other indications were terminated prior to completion due to low and highly variable oral bioavailability. In order to quickly address the current pandemic, targeting niclosamide directly to the lungs is rational to address the COVID-19 main clinical complications. Thin-film freezing technology was used to develop a niclosamide inhalation powder composition that exhibited acceptable aerosol performance with a fine particle fraction (FPF) of 86.0% and a mass median aerodynamic diameter (MMAD) and geometric standard deviation (GSD) of 1.11 μm and 2.84, respectively. This formulation not only proved to be safe after an acute three-day, multi-dose pharmacokinetic study in rats as evidenced by histopathology analysis, but also was able to achieve lung concentrations above the required IC50 and IC90 levels for at least 24 h after a single administration in a Syrian hamster model. To conclude, we successfully developed a niclosamide dry powder inhalation formulation by thin-film freezing for further scale-up and clinical testing against the COVID-19 infection. This approach overcomes niclosamide’s limitation of poor oral bioavailability by targeting the drug directly to the primary site of infection, the lungs.